Payne, 26, recently declined an offer from Guangdong in the Chinese Basketball Association worth $900K.
The former Michigan State standout has been a disappointment since he was selected by the Hawks with the No. 15 overall pick in the 2014 draft. He played just three games for Atlanta before he was shipped to the Timberwolves during his rookie year. Payne made 22 starts with Minnesota as a first-year player, then saw action in 52 games (including two starts) the following season.
He appeared in just 18 games last season, averaging 3.5 PPG and 1.8 RPG in 7.5 MPG. Payne also spent time with the G-League’s Erie BayHawks.
Payne is the first player to sign a two-way deal with Orlando. The Magic are eligible to sign one more player to such a contract.